The Australian on-premise Unified Communications (UC) market was worth $ 698.5 million in 2012. This moderate growth of 2.4% from the previous year was mainly due to cautious spending from businesses as the market reacted to uncertainties in Government policies and the federal election. As organisations opt to wait and assess the suitability of cloud based solutions, growth in the on-premise UC market will continue to be low. The overall UC market in Australia is expected to grow at a CAGR of 5.5% from 2012 to 2019. Changes in business attitudes towards capital intensive UC deployments are driving interest in hosted and cloud based solutions. As organisations find it harder to secure funds to invest in expensive UC infrastructure, it is lengthening the decision making process and thereby the overall sales cycle.
Frost & Sullivan's new research, Australian Unified Communications (UC) Market 2013, there are a number of disruptive factors emerging in the Australian UC market that have the potential to impact the traditional business model. The main factors include the growing significance of Microsoft Lync, the emergence of Over-The-Top (OTT) and cloud based vendors, the emergence of Google as an enterprise vendor and the potential of WebRTC.
Audrey William, Head of Research, ICT Practice, Frost & Sullivan ANZ says,"these factors are impacting the market to varying degrees, but when combined with cloud based solutions, have the potential to significantly change the UC market and threaten the dominance of existing vendors". Among the disruptive factors discussed, Microsoft's Lync platform is the closest to becoming mainstream and reaching widespread adoption. One of the important factors that has driven greater interest in Lync is its improved ability to serve as a PBX. Recent updates to Lync have closed the gap in functionality terms between traditional PBX systems and Lync PBX. In addition, Microsoft has also been aggressively engaging in marketing and education activities to improve market perceptions and trust in Lync.
Cloud based UC solution is the other major factor that will change traditional UC environment. Cloud based video in particular, is emerging as the segment with the potential to trigger a major shift away from on-premise solutions. Although several video conferencing vendors promote the interoperability features of their endpoints, the lack of an industry wide agreement still limits overall success. Cloud based video conferencing vendors are entering the market with the ability to by-pass interoperability and maintenance complexities. Cloud based video conferencing solutions enable organisations to avoid expensive and maintenance intensive backend infrastructures. The back-end processing (MCUs and gateways) is hosted by the provider from its own data centres or partner networks, requiring only endpoints (screens and cameras) from the customer.
Anand Balasubramanian, Industry Analyst, ICT Practice, Frost & Sullivan ANZ, says "Blue Jeans Networks is particularly prominent among this new breed of vendors, and as they drive market awareness for cloud based video conferencing, organisations will be reluctant to commit to the traditional resource intensive, on-premise based video conferencing solutions. Vendors with on-premise based solutions will ultimately be forced to adapt to this shift in business demand".
The Australian UC market has become a two-tiered market with the top two vendors accounting for over 40% of the overall market and a number of vendors competing for the remaining share. Cisco and Microsoft see each other as the biggest competitors in the market, mainly due to the breadth of UC solutions offered. Both these vendors have a strong collaboration focus and leverage their respective expertise in networks and desktop applications to drive growth. Among emerging vendors, Interactive Intelligence and ShoreTel continue to record high growth rates as awareness of their low cost solutions improves. While these two vendors typically have a strong foothold in the SMB segment, they are also beginning to secure bigger deals. Interactive Intelligence in particular is beginning to demonstrate its ability to offer hosted UC solutions. As these vendors increase their addressable market and become capable of catering to larger deployments, they will pose a serious threat to the major UC vendors.
The slow economic recovery in global markets and a slow-down in the resources sector have caused organisations in Australia to approach IT spending cautiously. One of the main impacts of this has been a decline in the number of large deployments and a general lengthening of sales cycles.
William states,"Most channel partners are facing tighter profit margins in selling on-premise UC solutions and are noticing a shift towards hosted and cloud based solutions. They are challenged to build UC services and cloud capabilities that offer better margins, whilst offering an avenue for future growth. Partnering with vendors such as Cisco and Microsoft, which are well positioned to address the changing UC market is important".
Frost & Sullivan's Australian Unified Communications (UC) Services Market 2013 report included results of a survey of 227 IT decision makers in Australia which found:
• Cisco and Microsoft are each mentioned by about one-third of organisations as the preferred vendor for cloud based UC solutions. This reflects the strong market position secured by Cisco and Microsoft in the Australian UC market, giving them a clear lead over competitors.
• Although the number of organisations replacing their PBXs with Lync is small, the solution in being closely evaluated by IT decision makers at the time of infrastructure upgrade or refresh. Close to 40% of organisations are favourable towards replacing their PBX infrastructure with Microsoft Lync PBX. This perception represents a significant improvement in business perception about the suitability of Lync as a PBX solution.
• Nearly 50% of organisations prefer to use a local carrier or telco for their UC deployments, with the preference for using a telco for UC deployment almost evenly distributed among large organisations and SMBs.
• Over 50% of organisations are likely to consider cloud based video conferencing solutions at the time of the next video conferencing infrastructure refresh.
• Over 50% of organisations in Australia consider Office 365 to offer the best functionality for cloud based UC solutions. This preference is almost evenly distributed among large organisations and SMBs.
Frost & Sullivan Australian UC Market Report 2013, forms a part of the Frost & Sullivan Enterprise Communications Research program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. The report also includes survey results and statistics of 227 IT decision makers in Australia to understand market behaviour and views towards Unified Communications (UC). Respondents were senior management level executives, IT managers and IT decision makers with control of or insight into the technology budget and strategy of their organizations.
About Frost & Sullivan
Frost & Sullivan (frost.com), the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact us: Start the discussion.